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What a Small Business Owner Can Do To Ensure Their Supply Chain Has a Competitive Advantage

Mompreneur Anna-Maria Mountfort started with a brilliant idea.
After her toddler lost her mittens in a snow bank for the umpteenth time, Mountfort created mimiTENS &ndash; a kids&rsquo; line of cute and cozy mittens with extra-long cuffs, which are harder to fling off and lose.

Wed., Nov. 7, 2012

By: Tracy Nesdoly Special to The Star

Mompreneur Anna-Maria Mountfort started with a brilliant idea.

After her toddler lost her mittens in a snow bank for the umpteenth time, Mountfort created mimiTENS – a kids’ line of cute and cozy mittens with extra-long cuffs, which are harder to fling off and lose.

The idea, launched in 2007, met with great approval from her circle of equally annoyed moms, and business took off. She won accounts at children’s stores in Canada and Europe, and is also stocked by the Whole Foods Market in Canada and the US.

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But there was a hitch. Growing the business so quickly, past what she could realistically accommodate from the comfort of her own kitchen, meant Mountfort had to become a master of the supply chain, fast.

“mimiTENS has so many inputs and partners - three different kinds of fabric, embroidery, labels, hangtags -- I sometimes feel like it is a minor miracle that product gets to stores and on kiddie hands,” says Mountfort.

“It is a complicated balance.”

So, most of her time is dedicated to managing her partner factories and shippers, which means she can’t afford the luxury of doing "the fun stuff," -- designing mittens and meeting with retailers.

“Entrepreneurs are usually driven by a passion for their product or service rather than worrying about how well their supply chain is delivering,” says Tim McLaren, a supply chain expert and associate professor at Ryerson University. “But small businesses face huge risks if they are not continuously monitoring and managing the relationships with their supply chain providers.”

So what can a small business owner do to ensure their supply chain is a competitive advantage rather than a source of risk?

“I would start with the old adage that you can’t improve it if you don’t measure it,” says McLaren. He offers three important metrics to watch:

Know your “perfect order rate.”

This is the percentage of sales orders which were delivered and invoiced to customers on time and error-free.

“If it is less than 100 per cent, can you pinpoint the root causes of the imperfect orders?" says McLaren. "Use this information to manage your suppliers better, offering them feedback, and use this information to negotiate better terms.”

He says while a 100 per cent perfect order rate is ideal, it may not be realistic – 80 per cent usually means a good performance, but it's always worth improving to 90 or 95 per cent.

Mountfort manages her own perfect target rate by staying on top of suppliers throughout the entire process.

“Communication is the key. Don’t let anyone interpret what you want, that’s when mistakes happen," she says, adding that, "radio silence is not a good thing. If someone doesn’t get back to you for a while, something is up. Find them and fix it.”

Track your “cash-to-cash cycle time.”

What is the average number of days from when you pay upstream suppliers to when you collect payment from customers?

“The lower your C2C time, the more cash you have on hand to invest in growing the company and the less you will need to rely on more expensive financing,” says McLaren.

Track supply chain cost vs revenue.

Maclaren says entrepreneur's should pay close attention to reducing costs and variability in their biggest cost drivers, and worry less about ones that aren't as significant. But there’s more than money at stake – often transportation is a major cost within the supply chain, but it may be worth paying more for quality, instead of partnering with the lowest bidder.

“In many cases, using a single provider to handle logistics, freight forwarding, and customs brokerages can cost a bit more, but can pay off in improved delivery times and customer service,” says McLaren.

Holding excess inventory can also be a costly supply chain issue. Mountfort deals with variables including weather -- a mild winter is great news for everyone, except mitten makers -- and fashion, so some of her biggest gambles are in the number of mittens to make each season.

“I manufacture more than one run per season, and manufacture locally, so I’m not over-ordering or over-committing,” she says.

But her best piece of advice?

“Don’t beat yourself up if you make mistakes. It’s rough out there and there are many factors beyond anyone's control, no matter how well you plan.”

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